PHOENIX - Alaska Gov. Bill Walker used Thursday night's State of the State address to make a forceful call for immediate fiscal reforms and new revenue after his state's rating was downgraded earlier this month.
After touching on a number of issues early in his speech, Alaska's independent governor turned to the state's increasingly troubled financial situation. Alaska is among several energy-rich states struggling because a glut of global oil supply has driven the price down to levels not seen in years, choking off the state's normally dependable revenues from oil royalties and taxes.
Standard & Poor's earlier this month dropped its rating to AA-plus from AAA on Alaska's general obligation debt, and its ratings to AA from AA-plus on the state's appropriation-backed debt.
"When I filed to run for governor, oil was over $100 per barrel," Walker said. "When I stood before you at this time last year, the price of oil had dropped 51% in 83 days. It was dipping to below $50 per barrel. Today, it's $26 per barrel. Some experts predict there will be no rebound for many years. That means we cannot continue with business as usual. That means we will have to change our course."
The governor outlined nearly $1 billion in budget cuts already made, and stumped for his "New Sustainable Alaska Plan" that he introduced with his budget proposal in December. Central to the proposal is legislation called the Alaska Permanent Fund Protection Act.
The Permanent Fund, an investment pool seeded by oil royalties, was founded by state constitutional amendment in 1976 and is today worth more than $50 billion. Alaskans are paid a yearly royalty, and Walker stressed that the royalty would be protected under his plan. Under that plan, half of the state's share of natural resource royalties would go toward dividends. The first year, dividend checks would be funded at a flat thousand dollars for each qualified resident.
For new revenues, Walker is proposing new taxes. Among them would be an income tax, which Alaska currently does not have. Walker said it would amount to less than 1% of the income of an average Alaskan.
There would also be taxes or tax increases on gas, mining, fishing and tourism. Walker referenced the S&P downgrade explicitly, and urged all his state's residents to read the rating agency's report. While his proposals are subject to change and compromise, Walker said, he also insists that reform happen quickly.
"As governor, I am flexible on the details of a fiscal plan, as long as the outcome meets basic tests of fairness and sustainability," he said. "I am not flexible, however, on our need to get there this year. It's time to fix the hole in our boat."
